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Brand Face-Off: MasterCard Inc vs. Visa Inc

Evaluating MA and V from technical and sentiment viewpoints

by 11/25/2013 2:24:01 PM
Stocks quoted in this article:

Two of the biggest players in credit cards are MasterCard Inc (NYSE:MA) and Visa Inc (NYSE:V). As of Friday's close, their respective market capitalizations were $91.3 billion and $157.9 billion. On the charts, both stocks have turned in an impressive performance during the previous 52 weeks. Specifically, MA boasts a year-over-year gain of roughly 57%, while V is up nearly 37%.

Helping the financial firms ascend the charts are a pair of long-term trendlines. On the one hand, MA's ascending 50-day moving average has been breached only once on a daily closing basis since late April, and has contained a handful of pullbacks, sending the shares onward and upward to higher highs. In fact, the stock touched a record peak of $759.70 last Monday, and is currently just off that mark at $756.63. Similarly, V has spent the better part of the previous two years sitting atop its 20-week moving average, and at $202.35, isn't far from its own all-time high of $205.25.

Daily Chart of MA since April 2013 With 50-Day Moving Average

Weekly Chart of V since November 2011 With 20-Week Moving Average

Turning to sentiment, however, MasterCard and Visa begin to diverge. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), MA has racked up a 10-day put/call volume ratio of 1.05, while V's ratio stands at 1.02. Although in both cases this means puts bought to open outnumbered calls during the past two weeks, the readings are quite different when viewed on a relative basis.

Specifically, MA's 10-day ISE/CBOE/PHLX put/call volume ratio ranks in the 35th percentile of its annual range, suggesting traders have purchased puts over calls at a slower-than-usual clip, relative to the past year. By contrast, V's corresponding ratio is just 10 percentage points short of an annual acme, indicating speculators have rarely initiated long puts over calls at such a speedy pace. From a contrarian perspective, this favors V, as a potential unwinding of these pessimistic bets could lift the shares.

In a similar vein, Schaeffer's put/call open interest ratio (SOIR) for MA stands at 1.19. Although this conveys put open interest outstrips call open interest among options with a shelf-life of three months or less, the reading also ranks in the bullishly skewed bottom quartile of its annual range. V's SOIR of 1.17, however, is approaching the top one-quarter of readings recorded in the past 12 months, meaning short-term traders have shown a stronger-than-usual preference for puts over calls, relatively speaking. If the stock continues to rise in the weeks ahead, this proliferation of negative attention could prove a contrarian boon, with the short-term bears hitting the exits.

In summary, MasterCard Inc (NYSE:MA) and Visa Inc (NYSE:V) are both technical overachievers. But, because there's more room for V to benefit from a change of heart among option traders, it's the winner of this brand face-off.


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